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We have a perfect guest to speak of our equity. Conversation of the day is stephenoth He is with Federated him as we're thrilled that he could join us here this morning. Just as a general statement, and it goes back to the day you and I looked at AOL Time Warner and said, really, did these deals work out? My answers, No, there's no evidence they're a value.
Add They haven't added a lot of value.
Tom. It's gotta go longer than nasty, but it's not TV. You gotta have longer.
This is an interesting deal though, I mean, you know, Netflix getting ahold of these studios.
I think it's it.
Could really I've been the whole Hollywood industry.
I think that's what can create profit where Federated can invest in it.
We're not in Netflix. Well, we're in all these stocks, but we're not heavy there. You know, we we'd rather on on these mag seven names. We kind of play relative value, and for us right now, Amazon is maybe a better value if you will. I mean, people talk about a bubble, but you can buy Amazon at eighteen times cash flows. It's really not bad for a company that we look at it and say to you, you're you're getting aws AI and you're kind of getting the retail business for free.
Yep.
See twenty twenty five. It has been a really wonderful year for investors. I mean, fifteen percent in the S and P twenty percent in the NASTAC fixed income, high single digit returns. What's kind of the setup for twenty twenty six for you guys?
We think it's pretty good.
We've got a two year target of eighty six hundred, we've got seventy eight hundred for next year, and really driven by earnings growth. At this stage, we've got earnings at yeah, three ninety out three years, and you know Stock's eight nominal GDP growth. Nominal GDP growth looks really good to us. You've got the AI revolution driving earnings, You've got enormous productivity. We've got GDP next year up
three percent. I think the consensus is two we've been on the high side along, we've been more right than wrong on that. But you know, you've got a lot of stimulus coming next year that we think could get you a surprise on the upside, and with the job market relatively stable, that means a big boost in productivity, which is a big boost in earning. So I think the setup looks pretty good.
Paul, SPX eighty six hundred, I'm all in is Dow sixty thousand?
Yeah, a forty eight.
I've never done that. I've never done That's the first.
Again, what sectors kind of screen well for you guys, Steve, because we've had tech has been such a start for so long, and then the AI story over the last two or three years has been the star.
What sectors screenwall.
Right, So what we're trying to do is we don't want to be out of this AI trade because it's the driver, but we're just modestly overweight those stocks and again playing relative value within there, and we think the big picture next year is finally this broadening out happens. The FED cutting helps the interest rates sensitive parts of the economy that have been suffering, so that starts to live housing, regional banks, emerging markets actually had a good
year this year off of very low levels. We think that's a really interesting place. So we are playing this broadening out trade, but not going underweight or avoiding. The drivers of the same witch are the tech stocks, but we think they're kind of they're going to becoming a relative value play within there. We don't really see them as necessarily leading the market forward next year.
Help us with the gloom that's out there. Three years of double digit return. People are modeling a fourth year of double digit return. It's like three times Paul. Since World War Two, we've had this oddity. How should people cautious, including clients have federated, How should they be enthusiastic if they don't feel that way.
Well, what we've been saying, Tom, is we're in a secular bull market here. This is only the third one in the last hundred years. They happen after you've had a fifteen year bear where everyone is lost a lot of money, which they did between ninety nine and thirteen, and they're forever cautious for a generation.
The scar that's what it's like. Depression, be right, That's.
What drives the bull and that's why here you know, as soon as we get a little bit of a pop, everyone's talking about bubbles. We put out on our website earlier this week a bubble monitor, because in our experience, you've got to look at bubbles from the perspective of several different dementi that tend to happen kind of in conjunction with one another, not just one. So overinvestment one
people talk a lot about. But excess liquidity, we're not there. Actually, the Fed's probably too tight regulatory errors.
We're not there. You know.
Over investment you could sort of make the case maybe, but if you look at the levels of investment relative to GDP in this phase, it's still below what you saw in the other big industrial revolutions, and it's being funded by cash excess debt, we're not there. And over evaluations, we just went through the story on Amazon. I don't think we're there yet either. So we've got a few things for lashing y'all. A little bit of fraud out there that's never good. But you know, we think generally
we're early. Before you start calling for a bubble.
To get your Wednesday started. Stephen off with this, he's a federal inter mens here Inequity's got a real equity show. We'll do some bonds with Irig Jersey later, and we'll do some real estate as well. We're doing commodities today, we can do that. We'll do commodities as well. Paulstrading and Time Keen. The way you listen to us, Thank you, ninety ninety one FM, Nathan Hager Radio in Washington, ninety two nine FM in Boston, Bloomberg eleven three zero here,
and of course on YouTube. Subscribe. The way you do is somebody asked me the other day, how do I get you on YouTube? Okay, here's the way you go. On Bloomberg Podcasts. Up comes Bloomberg Podcasts. We do the live show every morning. Subscribe to Bloomberg Podcasts on YouTube to see handsome Steve Off.
Yeah, just click a button. There you go, Steve. How about US equities versus maybe rest of world equities. We had a little bit of a migration earlier in the year out of the US maybe into Europe and some other markets. How do you think about that?
Yeah, I mean those markets were really cheap, and a lot of it was actually a currency place. Okay, yeah, because you know that was a big move I just came back in September. I was out in Japan with our Japanese analysts and just came back last week from a long trip out to Europe talking to folks out there, so I'm a little fresh on that. And I would say this, if you look at EFA, which is a technical term for basically the developed world outside the USA,
Europe looks okay to US. You know, it's not as cheap as it used to be relative to US, it's still relatively inexpensive, and the downside isn't really there the econ you know, the governments are spending more money thanks to President Trump on defense, but on the other hand, there's not a lot of upside and there's not a lot of AI technology in Europe, so it's kind of backstage.
We think it's okay. Japan is really interesting. It's it's you know, restructuring, first time the real estate markets finally come back after thirty years. Tom you probably remember the days when Tokyo real estate was more expensive than all of the United States, et cetera. But it's starting to really come back now. So we think that's interesting. But basically the way we're staged here is we're modestly overweight
so called EFA Developed because of Japan. We're overweight EM because emerging markets is the only place outside the US where you can get technology stocks basically in Asia, and we think that looks interesting. We think Latin America next year looks pretty interesting. So we're overweight there, but our big overweights remain in the US because that's where you know, this is the leaders here in this industrial revolution.
Right, I mean, evaluation here is just extraordinary, isn't it.
Well, As I said earlier, I think on the max seven in some cases it is are, but there's other ones in there that look pretty valuable and pretty cheap. And then on the other side of it, the rest of the broader market actually is inexpensive. So we think in the US the big story next year is finally this broadening out trade. It's going to benefit from these raid cuts from the FED, the regional banks, the housing sector, the industrials.
So you know, we're.
Playing the broadening out trade in the US, hanging in there with the US tech stocks but trading relative value and then looking outside for more attack in Asia.
Let's go William Priest here, what is the Steve Off? What is a steve ofth process to identify quality free cash flow growth.
Right, So you know people talk about quality and I had never met a PM in my life who didn't say he buys quality stocks. So you know, you got to define it so that we start with a management team that we believe in and has a track record of growth. The second is we look at cash flows being generated by the business in a business position that can sustain and protect those cash flows. And we want to see cash flows. We want to see pretty good,
solid balance sheets. We don't want to see people playing around with fake earnings.
Because the time I got to bring this up, folks, this is so important what you're hearing here. This is like the mistakes that are made out there. The fundamental outlaw underlying of quality free cash flow is the partial differential of revenue growth. What you started with anominal yeah GDP absolutely, if you don't have a revenue growth beeps above norm however you want, you know, fan distribution whatever. If you don't have revenue growth, you can't get down to the bottom of the feld.
You can't get cash flaw.
Yeah, it's just that simple part. I can't say nominal GDP is where I am.
Steve, we said the biggest IPO of the year, price less name Medline.
I missed this.
What is it? I mean, six point three billion dollar IPO. That's going to be kind of a bullish sign, right, I mean, I mean it just seems like if you're raising that kind of capital in this market for a traditional healthcare company, what do you make of that?
The middle syllable economy is confidence.
YEP.
So you're absolutely rightful with that question. It's something when I review everything's going on with our board every quarter, our clients. I look at IPO activity M and a activity of late. I found myself kind of as the reception a Federal Hermes after five pm when the regular staff goes home and you've got these road shows coming through. Uh, and it's you know, Steve is introducing me able to you.
But you know there's a lot of activity there. We're never not nowhere near back the bubble days, if you will, when things are really popping through lunches.
Yeah.
I love to see this activity because to me, it is a sign that animal spirits are coming back into the economy, and that's what drives everything else.
Medline MDL and thank you Paul, I miss this completely. Did you get your eight thousand shares?
Yes?
Sure, absolutely, I just want to be sure we're taking care of But this is like, Paul, this is like the way it used to be. I mean, and you said.
We're seeing some M and A activity out there, We're seeing some IPO activity out there. A lot of that boats I mean, or suggests that the market's pretty comfortable with where things are right here. So get that thing.
Steve, wonderful to have you in. Thank you. Likewise, stranger Stephen a legend at Princeton Federated amazild that he could come in stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
One of my great inventions is the phrase chart paragraph. Charter. Came out of Bear Stearns and Golden Sex years ago, John Writing's work. David Malpasses worked on Ossius and Dudley and the team there carrying on that tradition. Eric Winnigrad is brilliant at Alliance Bernstein doing the chart paragraph thing. I want to get to aggregate paycheck in a moment.
Steve Authur new Guests just came in with a wild two year optimism on the equity market and the equivalent Dow is now fifty nine sixty thousand, and he pins it off nominal GDP gus current GDP, real GDP plus the inflation component. What do you see out two years?
Well, so I think that's the important part of that is the inflation component. Right, A nominal GDP has been elevated this year because inflation has been sticking. With inflation still running three percent, nominal GDP is going to be higher, and Steve is right, equities benefit from higher nominal GDP.
So that all makes sense.
The question on a forward basis is, if inflation comes down, as we expect that it will, what does real GDP do? What does real growth do? And I think the jury's out on that. You can tell optimistic stories around AI and the booster productivity history tells you it usually takes longer than a year or two for these technological advances to really manifest themselves in terms of massive productivity growth. So we share the idea that the economy will continue
to expand. I would say that we are not quite as optimistic as Steve seems to be. I'm an economist, or sort of. I lose my guild card if I'm too optimistic about anything.
I switch Deceber. We're asking the economists what the market will do, and we're asking strategists and managers what the economy will do.
Well, Eric, what do you make of the economy The labor data we got yesterday?
So I don't think the labor market data really changed our picture of the economy, right.
The labor market is certainly.
A lot slower than it was six nine months ago, where we're in a low higher, low fier economy.
I think people are aware of that.
I think that it is I would phrase it as sort of precariously balanced, in the sense that labor supply has been constrained by migration policy, and labor demand has been constrained by a variety of different factors, and so we're sort of sitting close to a neutral ish level at a lower level of hiring. What I do take information from, though, is that it is only close to balanced. The unemployment rate has gone up for several months in
a row. Now is at a new cycle high. And that's tells you that labor demand is falling faster than labor supply. It's not a lot faster, but it is faster, and to me, that's the primary driver of why I expect the FED to cut as we move through next year.
We're going to get some inflation data tomorrow. There, how do you view that? What do you expecting to see tomorrow? Again?
You know, the evidence that we have, and this is the first week that we've gotten data since the government shutdown ended. The evidence that we have from private sector sources, from other places is that the economy didn't change meaningfully during the shutdown. I expect the inflation data to show that, which is to say that it's going to be sticky. You know, I don't think we should expect a dramatic change from where we were before. Goods prices are elevated
because of tariffs. Services prices are coming down, but only slowly. We're still stuck sort of around three percent, and it won't be until next year that we see real progress on that.
A lot of good analysis yesterday is really really valuable. A lot on LinkedIn and Twitter, Eric Uinigrette, I love your phrase aggregate paycheck. That's sort of how each and every house listening and watching the show feels. There's like the aggregate paycheck into the house. Do we risk a negative real aggregate paycheck.
We've been close at different times this year. You know, that's where inflation really starts to bite, because salaries adjust, but they don't adjust as quickly as prices do. And so you have at various times this year been dancing with the idea of households losing ground in aggregate. Right, so this doesn't mean every household, but some households losing ground relative to where prices are. Right now, we're sitting on a six month annualized basis just above zero, and
to me, that's the primary driver of the economy. We can talk about capecs, investment, we can talk about AI and all that. At the end of the day, this is still a consumer driven economy. And if the household paycheck doesn't stay above water, things start to look pretty pretty dangerous.
Then in Dartmouth College, when you looked at this, you bring it over to the political mandate. If we have flat real wages, a crushing aggregate paycheck in America. That really drives a central bank to a more accommodative strategy.
Right, Well, it should do, right.
You know, it's a challenge for the central bank because if the reason that the paycheck is running close to zero is that inflation is too high, it's not clear that they're supposed to cut rates, right. Maybe they're supposed to stay tight and address it through the inflation side of the mandate. I think Chair Powell's been eloquent in talking about this and saying that the FED is being pulled away from its mandate in both directions. That's why
you see the discord within the Fed. That's why you see the sense in both directions there is some evidence of economic weakness. There is also evidence of inflation stickiness, and so it's not clear what they're supposed to do. But Tom, when you say, you know, this brings up the political side of things. We have not had to think about this for a while, but we will as
the year progressive. We're rolling toward midterm elections, and you know, with affordability looking likely to be one of the primary issues, it's not clear how the American public will react in a political sense if the paycheck were to fall into negative territory, or if they were to feel that things are deteriorating.
You say that the run rate of hiring has clearly slowed this year and remains weak by historical standards. Why is that so? I think there's a couple of aspects to that.
One is that labor supply has slowed, there are fewer workers available. Another part of it is that businesses have gotten a little fat on labor. I think that people hired and you know, rewind a few years when we were here talking about labor shortages and businesses couldn't find people. As a result, once they found them, they've been very reluctant to let them go. So businesses have been running at full staff for a while, which diminishes their hiring needs.
But the primary driver I think has been economic uncertainty. Businesses have not wanted to hire in an environment where they don't know the policy regime. The month, if you have to pick a month where hiring really deteriorated the most and moved into this lower trajectory, it was April, right after the tariffnounce And I don't know that that's a reaction to tariff specifically so much as it is a reaction to the uncertainty.
We do our Eric winnigred audible here folks on China with his work at Dartmouth and their acclaimed Asian studies program Dembra eight can publish out of London today for Bloomberg on luxury and there's a basic idea that the three cities in China that do luxury Shanghai, Hong Kong vision. I guess it will come back. I'm reading Bloomberg News on the fiscal structure of the Xi administration, the GI government,
and I'm seeing some real stress there. How do you received China for Americans in the next year.
So from an American perspective, you know, China is not as relevant as it was before because of the tariff policy. There's been a redirection of exports. If you look at China, their trade surplus has hit a record this year, even as their trade into the US has diminished because of tariff policy. They are exporting more to Europe, they are exporting more within Asia, they are exporting more to South America.
They have to continue exporting because in order to keep growth positive, they have to continue producing and domestic demand in China. As we've talked about before is very weak. So if they're going to produce it and people in China won't buy it and they can't sell it to the US, they have to find somewhere else to sell it,
and they have. And I find it a little bit ironic that in the US we're talking about the affordability crisis, China is essentially exporting deflation everywhere else in the world because we won't let them export it here anymore.
So you know, look, that's brilliant, Lisa, write that down. Place that was brilliant not to import their price decline.
Yeah, and look, there may be sound political reasons for that. You know, we've talked about wanting to reshore manufacturing and all of these already.
Now it's the manufacturing jobs and the jobs report, Paul, there's no evidence we're not yet.
And again this goes back to business uncertainty. We might at some point. Part of our forecast for next year is the idea that you'll get a little bit more capex in the US as uncertainty fades. But there's a reason that we were producing stuff offshore in the first place, which is that it's a whole lot cheaper. And if you can produce it a lot cheaper, then you can
sell it a lot cheaper. And so you know, this idea that you can just sort of cut China out of our production chain and not have an impact prices doesn't make any sense, and we're seeing that.
Eric, Thank you so much Alliance Producing. Eric winnigred I can't say enough about his work. He's a chief US economist is thrilled to get his perspective. Stay with us. More from Bloomberg Surveillance. Coming up after this.
Is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Stephen Kim is Withley, I didn't know you were. How did you end up in Evercore? Does? Did ed Heyman call up and say please?
Now? It was fortuitous? It was really it was really a great move on my part because so much of my sector is dominated by or influenced by macro And what better macro shop on the planet is?
How do you read ed Heymen? How does a guy like you own the high ground in American housing? What do you read in ed Heyman where you lean forward?
Well, I think ed Heiman has phenomenal contacts, and so he hears so much about what people are thinking across pretty much every sector that gives him an ed. I think that nobody else can mas the.
FED bet as we get disinflation and they's tight about multifamily housing, signal family housing everywhere but where Paul Sweeney lives. Okay, do you get just as a beginning conversation, do you agree that housing prices in housing inflation will dampen this year?
My view is that actually you could see existing home prices go retreat a bit, you know, one to two percent. I don't think it'll be palpable, because you don't. I think that would be very problematic. But I think you could see prices down one to two percent this year next year on the exist in the existing market, and I think actually that would be you know, positively received.
And I think that really what would drive that is homeowners who have been wanting to sell finally saying, you know what, we're going to make the move and I'm willing to take a little bit of a lower price because I still have significant amounts of home equity. I think that's something to really watch for in twenty twenty six.
Tom, You know, Steve's a player. He does not have to schlep into the evercore Isi offices in York City. He hangs a shingle in Raleigh, North Oh. Yeah, one of the most beautiful parts of the country down there, and he's right next to my duke, so you can go over there anytime he wants to see some good basketball.
Stephen.
We have Lenar reported today. It's some disappointing numbers that last night, some disappointing numbers here. Talked to us about Lenar and what these home building companies are telling you guys these days.
Well, the first thing to say upfront is that Lenar has a lot of idiosyncratic aspects to it. Right now, it's very, very fascinating, but there's no question there is a read across They are the second largest home builder in the country and it is tough out there. And what they told you was that even though mortgage rates have you know, trended down, it has not stimulated an improvement in home buying demand that was anywhere near what
they were hoping for. Okay, so that's certainly an important read across it generally confirms frankly, what I think most folks you know, would have gleaned if they if they, you know, just we're sort of paying attention to what the builders have been saying.
All right.
As a former director of research, this stuck out of me, Steve, you cover fourteen stocks, You've got fourteen holds.
I do right now.
I have going on.
We used to have. We used to be the permeable, you know, And a couple of months ago we said we still like the long term potential, but we basically hit the pause button. We said this group cannot be owned. And there was a lot of uncertainty, not only because the market was not responding to the lower rates that we saw coming into September, but also because the government was becoming increasingly interested in and proactive or talking like they were going to be proactive, and it was very
difficult to determine what exactly they might do. Their initial commentary, mostly communicated through Bill Poulty of the FHFA, was not looking good to me and or investors. Right now, Bill Poulty has sort of taken a step back, but it is still very uncertain what the government is going to do. And so in that kind of environment, I was, I said, we can't really make a convicted call with conviction. You know, a couple of months I've transpired. We're thinking about a
few things. So you know, we'll see what twenty twenty six looks like. But that's the explanation of what's going on right now with the ratings.
Across America this morning. The way you listen to us Stephen Kim, he is the evercore ISI on American housing, the research ones. I can't say enough about the acuity. Okay, let's start with this scam. What's a buydown?
So a mortgage rate buydown is an innovation that has actually has its genesis from many, many years ago. We're simply put anytime that any of us had gotten a mortgage, at some point we were actually asked, well, what kind of how many points do you want to put down? How much money do you want to put down upfront
to get a little bit of a lower rate? You know, generally speaking, you know, you put one percent down or one point they call it one, you know, one percent down, and you can buy down the mortgage rate, call it twenty twenty five basis points. You know, it depends on you know, what's happening with the bond market at the time. But something like that, you know, people put one or two points down. There's a couple of wrinkles though. One is the seller can sometimes pay for that instead of
the buyer. And so these home builders who are sellers, right, have been doing that so that they can offer a lower rate. But they're not just buying down one or two percent, you know, to putting one or two points in. They're actually sometimes putting down ten points and you know, ten percent of the loan amount and buying down the mortgage rate like one hundred and fifty two hundred basis points. This sort of thing. That's what's been going on for most of the last two years.
To keep the business going. Why don't they just cut price and affect a clean trendsaction.
So here's the important thing to understand. If you pay four percent of effectively the home price, you can buy down the rate one hundred basis points. Right. That takes let's say the mortgage rate down from let's say seven percent down to six.
Sweeney's taking notes, I'm taking all right, that's like a twelve percent reduction in the mortgage payment, roughly ten to ten to twelve percent reduction in the mortgage payment.
Well, how would you affect that if you didn't change the rate and you just you know, lowered the home price, it would be a twelve hundred basis point hit. Right, you have to lower the price twelve twelve percent to get a reduction, right if the rate was the same. Right, So, so which would you rather do? Give up four hundred basis points a margin or give up twelve hundred basis points in margin. They'll just said, you know what, I can do that math, I'm going to go with the
buy down. It'll cost me less, the buyer is happy, the payment gets reduced the same to tyebo.
On is this is legal? What's going on? So?
It is legal?
Right?
Beak but there, but but there's a button. It's legal, but the government has set certain limits to how much the seller can pay, and those limits are generally depending on the mortgage type, six percent, six points or three points. But I just told you that the builders were doing ten points sometimes even more. How do they do that? Because there's a loophole if you do your buy down a certain way called the forward purchase commitment. It's exempt, and with a stroke of a pen, that exemption could
be modified or removed. And so we point out this as a potential vulnerability that the builders should think about as we look into twenty twenty six and twenty twenty cent.
Interesting, we're talking to Stephen Kim, head of housing research at Evercore is side is.
Enough inside baseball?
That was some theme stuff the mortgage back Mortgage Bankers Association thirty or fixture rates like six point three percent or something. Is there a rate that's going to prompt sellers to say, all right, I'm ready to like sell my house, move down to Florida wherever I'm going to go, and move down to Raleigh to the Triangle, And is there a rate that will clear this market because nobody's.
Putting their house up for sale. I think that we get that question all the time. As you might imagine, right, there's this locked in effect of low mortgage rates. Somebody's got like a three and a half percent or three percent mortgage rates. They loving it, you know, because prevailing, as you said, is six point three This is great. And so people have asked people initially said, well, all those people are going to like die in their homes.
They're never going to move, right, that's a little simplistic. The reason why one moves. Some of it's financial, a lot of it ain't, yep. A lot of it is, you know what, mom's getting older, you know, we really need to go see her, or we're not seeing their grandkids enough, or I'm retiring. There's all kinds of reasons why the house that was good for you ten years
ago is not really that great for you anymore. And I would say that given the incredibly low amount of housing turnover that we've seen, it is very clear that millions of people we estimate about four million people right now, would normally have moved in the last few years but have not yet. Now the impetus for them to want
to move has not gone away. Those things that I just retirement, being close to the kids, being close to the aging parents, you know, those those are itches that do not go away unless they are scratched, and until they are scratched. So we think there's a significant penuptimend. Now that's not a rate thing, though, right, that's a steady pressure that's building building, and it's going to keep
building until they actually move. I think therefore that we should think about the unlock with respect to rates is it's not binary. There's not like a magic rate, but certainly rates go on and the lower makes it a little bit easier. You leave a little less money on the table. But meanwhile, it's really these life factors that I think are more important.
Well, and it's unfair to you. You know have record, you know you're looking at national and you've got all your list of companies, and that if you had a cup of coffee right now with a new mayor in New York City or with the governor of New York, the governors of the tri state area, this American housing crisis is tangible. What's the Stephen Kim's solution? Yeah, for Queens, what's the solution for Kansas City, what's the solution for la Well.
One of the reasons why I'm not in politics. There are many, by the way, but one of the reasons is because I don't think that the housing market is really really lends itself to a quick fix. There are fixes, but the fix comes from supply. You need to increase supply, and if you do that, you will put some downward
pressure on pricing. However, if pricing goes negative full retreat, you're going to kill demand because who wants to buy a leveraged you know, get themselves into a significantly lever transaction when prices are going down, right, your home equity is the first hit, right, So that's why I say I would say Goldilocks is a price reduction across the market one to two percent, adding supply, and you're going to work yourself out of this thing eventually. But it's
not a quick fix Research Triangle Park. It's Raleigh, Durham Chapel Hill, North Carolina.
It's been a great, great market for forty years.
Yes, how is it today? It's very good. You have a lot of in migration from places like New York, but much more so I would say the DC market. Most of the people that I run into are generally from DC, some Chicago, some California. There's a lot of tech, there's a diversified employment based there's also the state capitol y you have the three major universities, NC, State, UNC and Duke that are there. So it's a great market.
We're the CEO of Cornyn Steers in earlier what's it real estate to hear something and you know, I talked about the culture of management, so to go to Stephen Kim single best Buy, I assume that's wrapped around management as well, which is the superior operating officer of homebuilders right.
Now, I think in the home building area, I think it's it's pretty clear that Dr. Horton has an exceptional management team. They demonstrated that what's.
Their distinction, what are you different?
Well, it's a good, really good question, because it's not just one thing, but through decades of managing their company, they have successfully migrated from being sort of a scrappy entrepreneurial kind of company to being a more large scale but still entrepreneurial company. And they have made some very savvy bets without necessarily dictating it just from the top.
So their their skill is in homebuilding, so much of the decision making has to happen locally, and they've been able to incentivize their people interesting and empower those people to make really good that's hard.
Paul ten year track record, eighteen point nine percent per year. It's trained like Apple comput exactly. I think they nailed two, but forced.
I'll tell you the nail gun Tom. That is revolutionized the home building. I see these frame people frame up a house in like fifteen minutes. Now, it was unbelievable.
I mean a construction site. As a kid, they gave me a hammer, Tom, go to lud Suirley. That was the assumption.
Good stuff real quickly. Cost of building a house is lumber going? I mean, where are we just the cost of building a house these days?
So you know, we certainly have had seen some material inflation of how wherever lumber has actually been very well contained, and labor has also been surprisingly well contained. Going into the year, we thought, all my goodness, you know, with all the deportations and all that rhetoric, that we were going to see a lot of the laborers disappear, and that didn't happen.
Actually, why didn't that happen because I that was always called out here in it.
It was. One of the things is that the multifamily starts dropped significantly because you had had kind of a boom there like a few years ago, and then that came down and a lot of the same workers, you know, who are there's no there's no multi family. Well then they go to single family. So that's part of it. And the second of all, you know the guys, you know, the guys who might be afraid I shows up. Yeah, that keeps them away for a couple of days or something.
But you know what if they don't work, they don't eat. Yeah, right, so they're very tenacious.
All right, Stephen, thank you so much for coming on. Kim has head pausing research at ever court is I stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, Play Bloomberg eleven thirty Paul Stunian Time.
Keep Paul like Wednesday before the holidays, you know, and Lisa's got the party dresser?
Yep?
I mean you can't see the Bloomberg. Is it two or three parties tonight?
It's two?
Yes? Okay?
Dress was a steal. Okay, so the newspaper okay, speaking of a steal.
Okay.
You know how I always talk about the Costco hot dog, you know, dollar fifty deal. Okay, but the Wall Street Journal says you have to check out their vacation deals.
I'm telling you, I almost.
Booked my trip to Greece through Costco because of the offers. It's actually been around for a while, like Costco started babbling about twenty five years ago.
Yeah.
Yeah.
You walk out and there's huge advertisements everywhere.
It has like eight hundred in house agents, thirteen buyers, five call managers. I mean they it's multimillion dollars. It's not just booking in vacation packages, but it's cruises, it's rental cars.
It's like the whole I didn't notice the thing. Yeah my rental cars through there.
Yeah yeah yeah, but saving money I am because.
I compared it. I mean, granted, I'm paying for the membership, and that's the thing. You have to be a member in order to get the vacation. It comes with a few It's not Expedia, it's not booking dot Com. It's not that big. But you get like airline tickets through a package, so you don't get to kind of choose the exact airline like you It's kind of like Costco. You go there and you get what you get. And you don't get upset. You know, as my mom used to say.
We should say, folks surveillance. Lisa Mattea is not have a business affiliation with Costco now, except I want your record number shopping carts.
It's one in half, one and a half three.
You got radar, you've got red lights in the back. One here, so you don't take someone out in vegetables.
Next it gets dangerous.
Okay, global coffee prices, right, we've been talking about it. They've been going higher and higher for that cup of coffee. But I mean, let's face it, you can't kick the caffeine habit, right, So what Bloomberg has this article in the terminal. It says what more people are doing to make the cup more affordable? So they say drinkers are kind of trading down, like they're choosing the cheaper drive through options. Maybe they're going to convenience store coffee instead.
Don't knock the wah wah.
They have really good coffee, cutting back on the number of times they make the coffee run too.
That's another thing. And then you have the real like.
Die hard coffee fans who are going for they're binding the grind, they're buying the grinders, right, they're buying the drip coffee.
Make sure you're.
Buying the fancy espresso machine. Yes, that fill the counter space.
Yes, they say it's pricey, you know, upfront, but it's worth it because you say, even having to go, you know, to the store every day.
I mean, I got the charge. And Bloomberg folks just just grat in commodities. Will Kennedy driving that forward for us pretty much is the bottom of COVID and all that Paul ready, yep, up three hundred and sixty seven percent, twenty seven percent per year. That on a quick look at the commodity coffee.
My double short Moca on Saturday when I'm out doing the errands, five dollars and sixty cents and then I tip a buck. So there you go. That's my six dollars and sixty cents for a double short Moca. Some people do that, do it once a week. That's kind of mine. Once a week. Sure, that's your thing, all right, because we've got we've got again seven thousand different varieties of coffee up on the sixth floor here. That's Bloomberg
from all parts, very good, they are very good. I do have to say, next, okay.
This next one.
It's it's it's how more moms are taking over their kids adult kids dating profiles. And this is like the kid's request. So the kids are saying, you know what, I'm tired, I'm burnt out. This is in the journal they're saying. They're saying, mom, take over my profile.
Okay.
And it's not just mom, it's dads, it's the brothers and sisters.
Even grandma's getting in on the action. Okay.
They're redoing their profiles. They're you know, getting them a little bit better. They say it can bring some new perspectives. But there's some challenges too, because family members have different opinions, right, I mean, you know some people go for certain things.
You're not doing this for others. I never did.
They didn't have this when I was dating that my son does.
Yeah, okay, he did. It didn't lead to anything.
He found his other kids girlfriend by through a friend you know, at school.
Yeah, very good.
I don't know.
I think it's God.
I think the most intelligent thing, ladies, the most intelligent thing I heard the newspapers today was just.
Go to a bar, exactly exactly the old fashioned way.
Go to a bar, talk to somebody, You actually talk to someone I know.
Put the phone.
Dinversation at home yesterday? Is there a way to get rid of Nintendo? Switch is easy?
For no?
They threw a tantrum the newspapers a Lisa Manteo, thank you so much.
This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal